U.S. Law Firms Plan to Follow Trade Deal With Korea Offices

An elevated view shows commercial and residential buildings in Seoul, South Korea. European and U.K. firms are lacking in qualified lawyers to send to Asia’s fourth-largest economy because most Korean-speaking lawyers working for international firms are U.S.-trained. Photographer: SeongJoon Cho/Bloomberg

Yong Guk Lee, who will move from Hong Kong to open the new
office in the first half of 2012 said it will help the New York-based firm serve Korean clients who are investing and facing
more litigation overseas.

South Korean lawmakers last week ratified the free trade
agreement first negotiated with the U.S. government more than
four years ago. The accord, which is likely to take effect Jan.
1, allows American lawyers to enter a market where more than
$119 billion has been raised from debt and equity sales this
year, from $92 billion in 2005.

Cleary Gottlieb and Los Angeles-based Paul Hastings LLP,
which has also declared its intention to open a Korean office,
may beat their European rivals into Seoul. While the EU’s free
trade accord with South Korea came into force on July 1, no
foreign law firms have set up offices in South Korea, according
to Lee Ki Young, of the Justice Ministry’s international legal
affairs division.

European and U.K. firms are lacking in qualified lawyers to
send to Asia’s fourth-largest economy because most Korean-speaking lawyers working for international firms are U.S.-
trained, said Evan Jowers of Kinney Recruiting.

DLA Piper

“You just don’t see that many Korean lawyers that are
U.K.-trained,” said Jowers, the managing director of the
company’s Hong Kong and New York offices.

Getting closer to South Korean clients and law firms is one
of the reasons DLA Piper, the world’s largest legal firm with
more than 4,000 lawyers, is studying opening an office,
according to Alastair Da Costa, its Asia Pacific managing
director.

DLA, which is based in London, runs its U.S. and
international units separately and can use either the U.S. or EU
trade agreements to enter South Korea. It’s looking at the tax
implications and which makes more sense to use, Da Costa said.

“Korea is definitely a market a firm like ours wants a
presence in,” he said.

DLA, which has worked on deals including raising $600
million for liquid-crystal display maker LG Display Co., expects
investments from Europe and the U.S. into South Korea because of
the free trade deals and continued outbound investments, he said.

Korean Law

Foreign law firms from countries with free trade agreements
with South Korea are allowed to set up offices in Asia’s fourth-largest economy and begin offering advice on the law of their
home countries.

After two years operating in South Korea, they can form
alliances with local law firms and offer advice on South Korean
law. After five years foreign firms can hire Korean-qualified
lawyers themselves and independently offer advice on Korean law.

Hong Kong has served as a regional base for many foreign
law firms with South Korean clients because of low tax rates and
the relatively short four-hour flight to Seoul.

As they move to set up offices in South Korea, they face a
higher tax rate on their fees and a new cultural and regulatory
environment, said Jeffrey Jones, a former chairman of the
American Chamber of Commerce in Korea, who now works for a South
Korean law firm.

“There’s a learning curve, and in the meantime the
domestic firms will get better from the competition,” he said.

London Firms

While British firms like Clifford Chance LLP have said they
were looking to open a representative office in Korea, London-based Freshfields LLP isn’t.

“At present, we have no plans to open an office in
Seoul,” said Asia managing partner Robert Ashworth. Freshfields
hired Neil Chang from New York-based Debevoise & Plimpton LLP
this year to head its Korea practice.

Chang is based in Hong Kong, where Freshfields “has long
served the needs of Korean clients from,” Ashworth said.

While foreign firms already advise many South Korean
companies on their deals abroad, it’s uncertain whether they
will ultimately attract the local lawyers needed to provide
advice on domestic transactions, said Sean Lim, a partner at
Seoul-based Lee & Ko, the top-ranked legal adviser on Korean
mergers and acquisitions this year, according to Bloomberg data.

Economic Impact

The free-trade accord may help South Korea’s export-driven
economy expand by 5.7 percent within a decade and create 350,000
jobs, according to the nation’s finance ministry. The biggest
trade deal for the U.S. since the North American Free Trade
Agreement took effect in 1994 will boost exports by as much as
$10.9 billion in its first year of full effect, according to an
estimate from the U.S. International Trade Commission.

Lee of Cleary Gottlieb, which has about 30 Korean-speaking
lawyers including 17 based in Hong Kong, said Korean companies
are looking overseas for opportunities to buy technology, brands
and natural resources. Lee and Jay Hoon Choi will be the first
two lawyers to relocate to Seoul.

Like Cleary, Paul Hastings has served clients including
Samsung Electronics Co. in its $1.4 billion sale of its hard-drive unit to Seagate Technology Plc from its Hong Kong office
until now. It has 25 Korean lawyers, with 10 of them in Asia.

“It doesn’t make strategic sense for us as a service
provider that we’re so far from our client,” said Daniel Kim, a
partner in the firm’s Hong Kong office. “That’s why we’re so
eager to go in.”

“We plan to have our application as soon as the process
begins,” said Greg Nitzkowski, the firm’s managing partner.
“Being present there helps you be a market leader.”